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Fast Track

Fast-food Has Future

In Latin America

August 1, 1994|By CHARLES LUNAN Business Writer

Fast food is catching on fast in Latin America.

KFC International hopes to triple its number of restaurants in Mexico to 450 by the turn of the century. To endear itself to the 70 percent of the population under age 18, it has created Kenny Kid and his sidekick Hop-Hop. Kenny Kid is the fictional nephew of KFC founder Col. Sanders and Hop-Hop is a "furry creature of indiscriminate origin," said Steve Provost, a spokesman for KFC International.

"I describe him as cross between a chipmunk or a beaver on two legs," Provost said. "For some reason he's really caught on. In Mexico, three quarters of our advertising is geared toward children."

McDonald's expects to double its number of stores in the Caribbean, Mexico, Central America and Latin America to 800 in the next three years, said Bruce Wunner, who manages the business from an office in Boca Raton.

"We as a corporation are putting more emphasis on Latin America," Wunner said. "The laws have been changed, the economies are getting better. The politics are getting better and foreign investment is growing."

McDonald's and KFC are just two of the half dozen fast-food franchisers orchestrating big Latin American expansions from South Florida. Others include PepsiCo subsidiaries Pizza Hut and Taco Bell as well as Miami-based Burger King and Fort Lauderdale-based Arby's.

Arby's wants to expand from 153 to 1,000 overseas restaurants by 1998, said Laura Widmer, spokeswoman for Arby's.

"We are working on a five-year plan for Latin America," Widmer said. "It's definitely an area of great interest to us."

Arby's opened its first store in Ecuador this summer and has four in Brazil, three in Chile, one in Curacoa and 15 in Mexico, she said.

After Asia, Latin America is considered the second-fastest-growing and most lucrative market for America's fast-food franchisers. There is less competition and more demand.

KFC restaurants in Mexico average gross sales of $1.1 million compared with $700,000 reported for U.S. stores, Provost said.

"We expect Mexico to be the most profitable market by the turn of the century," he said. "It's already the most profitable per restaurant."

Labor costs are so much lower in Latin America that McDonald's franchisees can employ twice as many people per store, or 110, and still be more profitable, Wunner said.

Franchising has taken off in Mexico since 1991, when reforms made it much easier for foreign corporations to buy real estate and recover royalty payments. The North American Free Trade Agreement boosted prospects by cutting tariffs on many imported supplies.

The concept is catching on across Latin America thanks to broad reforms aimed at attracting more foreign investment and trade. Those reforms are irreversible, said Wunner, who has headed McDonald's Latin American operations since 1986.

After years of massive layoffs by state enterprises, cuts in subsidies to the poor and other austerity programs, residents across the continent are beginning to reap rewards.

"To me, the countries have crossed the threshold - not only the governments, but the people," Wunner said. "I think very shortly, Argentines will be able to get mortgages on housing. It's already happening in Chile and it will be happening in Mexico. People are beginning to recognize these are things they can begin to have that they've never had before."